Finding A Niche Within A Niche

Discover an even more distinct market and then capitalize on it

come through. Those retailers, plus five other outlets she has targeted for 2006, have hundreds of locations that could sell her hosiery.

Using a list of hosiery manufacturers provided by The Hosiery Association, Franklin began contacting potential manufacturers in search of one willing to take a chance on a startup. She also spent months studying major hosiery marketers and learning about her market. The research reported that, on average, African American women purchase 24 pair of hose annually and make up 24% of the pantyhose market. Rather than target the niche

BIG FISH IN A SMALL POND
While choosing a niche strategy may seem risky, because the size of the potential market is reduced, doing so can actually fuel a small business’s growth. By zeroing in on its very best business prospects from the beginning, a company’s marketing dollars yield a much higher return on investment. The business costs are comparatively lower, viral or word-of-mouth marketing occurs much faster, and customers are generally far easier to identify. They’re also very loyal, say Jennifer Basye Sander and Peter Sander, co-authors of Niche and Grow Rich: Practical Ways to Turn Your Ideas into a Business.

Despite their many advantages, niche businesses are the exception rather than the rule. The Sanders estimate that no more than 10% of all businesses today are niche-focused. The tendency on the part of most entrepreneurs is to target demographic markets with huge populations, such as the 18- to 25-year-old crowd, or everyone within a certain zip code, rather than zeroing in on customers with common interests and needs.

As business owners marvel at the success of niche-oriented businesses — think Starbucks or Curves, for example — some are adopting a similar strategy. This may explain why the number of niche-focused enterprises is increasing. “Niche businesses are on the rise because people are recognizing that their biggest competitor is a Wal-Mart” says Jennifer Sander. “They’ve also seen how mid-sized companies have struggled against the big guys.” Trends show that if mid-sized companies can’t compete by emulating Wal-Mart, smaller businesses will likely face the same challenges. To succeed, a new approach is necessary. For an increasing number of entrepreneurs, that approach is choosing a niche.

However, in business, there are never guarantees. Even playing in the smaller sandbox comes with its own set of risks. There is the possibility that sales won’t materialize from your niche customers, for example. At least that’s what Franklin feared, though she has since seen that her market is both broad and deep, yet still very focused.

Another risk, says Falkenstein, is straying from your niche. Once you become known for one thing, moving too far from your specialty may encourage customers to shop elsewhere. Also, it’s important to stay ahead of your niche — to anticipate what your customer base will want next. Expecting your business to remain the same is risky, she says. “A good niche is dynamic,” she points out.

MARRYING EXPERIENCE AND OPPORTUNITY
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